Property Tax Information
Setting the Tax Rate
Each year the City must have its tax rate approved by the Massachusetts Department of Revenue prior to issuing tax bills.
In order to have the tax rate approved the City must document all proposed spending and all sources of estimated revenue.
Since Massachusetts has spending limitation legislation (Proposition 2 1/2), there are exclusions and overrides that, once approved through special action by City Council and voters, require additional documentation. Property being taxed for the first time also requires specific reporting.
The Assessing Department gathers all documentation necessary to set the tax rate and submits it to the Massachusetts Department of Revenue along with a summary of that information on a document referred to as the Tax Recap. The Tax Recap is a 4 page document that summarizes all revenue and spending for the fiscal year. The Recap is accompanied by a number of back-up documents which are for the most part summaries of financial information submitted throughout the year or worksheets that explain how certain information on the Recap was determined.
Specific documents accompanying the Recap may change from year to year and municipality to municipality depending on the type spending (Community Preservation fund, bonding, transfer), and the type of government (city, town, town meeting, town council).
Typically, Gardner submits the following forms with its Recap.
A parcel count and value summary of real and personal property sorted by State land use classification. The LA4 is the "parent" document for a municipality's fiscal year valuation. All documents relating to the municipality's value are checked against the LA4.
The LA-13 summarizes the value of property that is being taxed this year for the first time - aka- "growth" or "new growth." These properties include new homes, additions and new subdivisions. Documenting this valuation change is important because it allows the City to increase its tax levy by the amount of new taxes generated by these properties. Without a provision for taxing "growth" Prop. 2 1/2 would prevent municipalities from generating revenue from newly developed or improved properties.
The LA-15 summarizes property sales as they relate to past and proposed assessed values. The LA-15 is submitted in years when there is not a full revaluation, it verifies that the City is assessing at 100% (within 10% of 100%) of market value each year.
The LA-5 is a summary of the "Classification Hearing" conducted by the Board of Selectmen each year prior to the setting of the tax rate. The LA-5 shows property values by the five major classification types, Commercial, Industrial, Residential, Open Space, Personal and the percentage of the tax levy each will pay. The LA-5 is the "parent" of all documents relating to the distribution of the tax levy among property classes.
The B1 accounts for Free Cash revenue and spending.
The B2 lists appropriations from special sources. The special sources are often accounts that have a dedicated source of funding and requirements as to what is purchased with the funds. The B2 also documents transfers from previously voted appropriations. Since virtually all spending is accounted for on the Recap; any spending that does not involve taxation in the current year AND does not fall into any other category will probably end up on the B2.
Documents spending from "Revolving Funds"- Spending from a revolving fund does not require a specific vote; the D.O.R. uses the A3 to keep tabs on how much is being spent through the various revolving funds.
The A4 summarizes spending from the Community Preservation Fund (CPF). The CPF is used for specific projects in a manner proscribed by law, the A4 documents that we comply with the law when spending these funds.
The OL1 is used to show that the "Overlay" is properly funded. The Overlay is money set aside each year in order to fund tax refunds from that year's levy. The refunds are generally tax exemptions for the elderly and infirmed, exemptions for veterans and tax abatements.
Documents that are used in conjunction with the Recap but not submitted.
The Cherry Sheet
Named for the red paper on which the document was once printed, lists the money the State intends to distribute to the City in the upcoming fiscal year.
The C.S.1 lists the charges the State will DEDUCT from the "Cherry Sheet" for services provided by the State and County. The C.S.1-ER is not named after a paper color; as far as I know it has no name other than "NOTICE TO ASSESSORS OF ESTIMATED CHARGES." It comes with the "Cherry Sheet" and is thought of as a bill from the "company store".
Levy Limit Worksheet
The Levy Limit Worksheet shows compliance with Prop.2 ½ by listing the tax levy along tax "growth" and any debt exclusions, capital expenditure exclusions, or overrides.
Spending, Property Taxes & the Tax Rate
We are developing this portion of the City's website with the hope that it will evolve into useful a source of information for residents, taxpayers and others with an interest in Gardner finances.
We have made an attempt to simplify this information when possible but unfortunately tax laws and regulations tend to defy attempts at simplification. Please let us know if there is information you would like added or explained in greater detail.
Proposition 2 1/2
"My taxes increased by more than 2.5%! How is that possible?"
One thing we should make clear is the intent of Proposition 2 1/2 is that Proposition 2 1/2 is not tax limitation legislation like California's Proposition 13 and Florida's so-called "SOH." Prop. 2 1/2 is more a limit on spending. The legislation dictates a city or City cannot raise in property taxes (the total tax levy) more that 2.5% of the total value of the City in any single year, that 2 1/2% of the total value of the City's taxable real estate is the Levy Ceiling. Further, with a number of annual built-in exceptions and provisions for overrides and exclusions, it cannot increase its tax levy by more than 2 1/2% a year or it will surpass its Levy Limit.
Gardner would have to nearly triple its spending to hit the levy ceiling but, as with most communities in Massachusetts, is frequently up against its annual levy limit. Why?... For something with such a major impact on municipal finance, the 2.5% figure is purely arbitrary; at the time the legislation was written there was no formula to arrive at the 2.5% number, it just seemed appropriate to the authors and was voted as written. Like all limits on spending, it makes no sense without limits on costs. But... we have it and work within its limitations as best we can.
Values & Tax Rate
In Massachusetts real estate is taxed based on its market value but the city cannot raise more money in taxes simply because the City as a whole increases in value due to increased demand or inflation. When values go up the tax rate must go down proportionally. The same is true but in reverse when values drop; the tax rate increases as values decrease as long as spending remains unchanged.
Built-in exceptions allow a spending increase of more than 2.5% of the prior year's tax levy.
Growth / New Growth
Property that is being taxed this year for the first time - aka- "growth" or "new growth." These properties include new homes, additions and new subdivisions, previously tax-exempt properties that have been sold to a taxable entity. Without a provision for taxing "growth" Prop. 2 ½ would prevent cities from generating revenue from newly developed or improved properties and eventually services demanded by those new properties would overwhelm the community's finances.